Question

Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is:

Answer 1

7.5 times

Step-by-step explanation:

Inventory turnover =
`(Cost \: of\: goods\: sold)/(Average\: Inventory)`

We have been provided that,

Cost of goods sold = $15,000,000

Average inventory for the year = $2,000,000

Therefore, Inventory Turnover ratio =
`(15,000,000)/(2,000,000)`

= 7.5 times

It means on an average how many times the inventory is sold, and replaced during the period.